Power Engineering - Williams resolves major issues related to debt of former subsidiary

TULSA, Okla., March 5, 2002 -- Williams has announced a significant step toward resolving major issues related to certain financial obligations of its former telecommunications subsidiary.

As a result of successful negotiations with noteholders, Williams has confirmed its responsibility for semiannual interest payments on the $1.4 billion WCG Note Trust notes. The debt, which matures in March 2004, will be reflected on Williams' balance sheet in 2002. As a result of today's agreement, Williams expects that any change in the business condition of Williams Communications Group will have no impact on this note.

Financial terms of the deal were not disclosed. The consent is effective immediately.

Under terms prior to the negotiations with noteholders, the notes were contingent liabilities of Williams with the full $1.4 billion due upon certain changes in the business condition of Williams Communications Group or a trigger directly tied to Williams' credit ratings. The restructured terms remove those triggers.

"This is a very positive development -- one that we believe will be well- received by credit-rating agencies and lenders. We believe our stockholders also should feel more confident that this eliminates any substantial near term cash requirement related to this issue," said Steve Malcolm, president and CEO of Williams.

"We are continuing to resolve these financial issues in a manner that is designed to preserve the financial flexibility and appropriate debt and equity levels that support our investment-grade credit rating," Malcolm said. "The major elements in our effort include today's restructuring of the WCG Note Trust notes, reduced capital spending, asset sales, issuing securities that will result in the issuance of common equity and reducing costs. In addition to what we've already achieved in this area, we will continue to pursue additional measures that we believe best enable the long-term success of the company and meet the credit-rating agencies' new, more conservative standards for an investment-grade balance sheet."

Malcolm said the company plans to release audited 2001 earnings prior to a March 8 analyst conference.

Williams, which on Jan. 29 reported record recurring 2001 segment profit of $2.7 billion, has previously announced a balance-sheet strengthening plan that includes the issuance of $1.1 billion in securities, which has already been accomplished, reduction of 2002 capital spending of $1 billion or more, the sale of assets, and reductions in operating expenses. Part of that overall plan included the removal of triggering events such as the ones eliminated today.

The solicitation agent for the WCG Note Trust consent agreement was Salomon Smith Barney.

Williams, through its subsidiaries, connects businesses to energy, delivering innovative, reliable products and services. Williams information is available at www.williams.com .

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